I initiated regular coverage of the biotech industry at Forbes, and wrote many of the early stories on genomics, personalized medicine, and the automation of drug making. I also launched the Arabic edition of Forbes, and oversaw what became highly influential lists in the Middle East, such as the 50 Most Powerful Arab Businesswomen. Qaddafi's daughter really wanted to be on it, and George Bush mentioned the list at the World Economic Forum. In between, I helped my father, a nephrologist, form a start-up that develops software to assist general practitioners in diagnosing patients. It is part of the exciting new field of health information technology, and it is going to shape the way we interact with our doctors.
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Epic Systems' Tough Billionaire

This is the expanded version of a piece that appears in the May 7, 2012 issue of Forbes Magazine.

More than 6,500 guests gathered in an overflowing auditorium at the Intergalactic Headquarters of Epic Systems this past September. The campus, nestled on 800 acres of farmland in tiny Verona Wis., was the site of an annual event for customers. The theme: “Once Upon A Time.” To loud applause, a dark-haired woman dressed in leather chaps with a bandana tied around her head strode on stage, where a Harley-Davidson a.k.a. gooseneck awaited. The modern-day Mother Goose in this fairy tale was Judith Faulkner–simply known as Judy in the health care galaxy, living up to her motto: “Do good, have fun, make money.”

She has made a fistful. From her remote midwestern outpost, Faulkner, 68, has quietly built Epic, which sells electronic health records into a $1.2 billion (2011 revenues) business—double four years ago. She has done it without outside capital, and no marketing. She remains the company’s single largest shareholder, rebuffing an attempt by her biggest client health care giant Kaiser Permanente to get a piece of equity, when Epic was much smaller. The company won’t disclose earnings, but says it’s profitable, and proudly proclaims to have zero debt. By next year, 127 million patients or nearly 40% of the U.S. population will have its medical information stored in an Epic digital record. Helping enrich Faulkner is also a piece of government legislation that subsidizes the adoption of electronic medical records, by paying millions to qualifying hospitals. (See Matthew Herper‘s story on Cerner here).

Forbes estimates her net worth at $1.7 billion. She has amassed her wealth by carefully choosing her customers, and eschewing the sales pitch in a community distrustful of salesmen—1% of its 5,200 employees are in sales and marketing. It has exactly five senior salespeople, and no one is paid a commission.

At an internal presentation, marketing folks once flashed a PowerPoint in jest that said “Marketing Sucks…Epic Systems.” At the beginning of each year, Faulkner commands her tiny salesforce to select customers based on whether they are fit to work with Epic—making it a privilege. “They don’t need salespeople, customers come to them; they’re like kids showing up at the door asking for Oreo cookies,” says Leo Carpio, a health IT analyst at Caris & Co. At rival Cerner, sales and marketing make up 4% of total expenses.

In the process, Epic has become something of a status symbol. Its list of well-heeled clients is made up of the upper echelons of health care: Cleveland Clinic, Johns Hopkins, and almost the entire University of California system are among its 260 customers. Faulkner is also the only head of a company to sit on a government-appointed policy committee that makes recommendations on standards for the exchange of patient information.

But in an era pushing for openness, Epic has accomplished this in a decidedly old-fashioned way. Its electronic health record is based on a 44-year-old programming language called MUMPS (Massachusetts General Hospital Utility Multi-Programming System). It is essentially a closed platform, which makes it challenging and costly for hospitals to interface Epic with clinical or billing software from other companies for the purpose of merging patient information. In addition to the software, customers pay dearly for hardware, and for the army of Epic-certified technicians that needs to be deployed to get the system up and running. But this is the stodgy world of health care. “The health care industry likes tried and tested systems,” says Richard Garnick, chief executive of Anthelio Healthcare Solutions, which helps hospitals implement digital records.

Beneath the rock star antics on view strictly for customers, Faulkner is not eager to telegraph her newfound wealth and power. She turned down our request for an interview. “She doesn’t want the spotlight on her,” explains her spokesperson. Interviews with people who know Faulkner paint a picture of a forceful, yet modest woman. Leonard Mattioli, an Epic board member, recalls chiding Faulkner for driving an old Volvo. “I told her next time you buy a car, take a man with you,” says Mattioli, the founder of American, a midwestern retailer of appliances and electronics. A few years later, Mattioli introduced his fiancée to Faulkner. She proceeded to pepper her with questions Epic typically asks prospective employees: “How many square yards of astroturf are there in the U.S.? Which person, dead or alive, would you most like to have lunch with?” Turning to a bewildered Mattioli, she said “next time you take a wife, take a woman with you [for advice].”

Faulkner got her start in the psychiatry department at the University of Wisconsin in Madison. She already had an undergraduate degree in math from Dickinson College in Pennsylvania, and was completing her master’s in computer science in Madison in 1976, when a professor recommended her to faculty members who wanted to develop a program that centralizes and tracks patient information. Faulkner wrote the code, using the computer language MUMPS. The founder of Meditech, an electronic health record company, had developed it in 1968 at Mass General Hospital. Faulkner’s program became the kernel of the Epic electronic health record. “We felt that the program held a great deal of promise in improving the usefulness of medical records,” says Marjorie Klein, one of the faculty members who gave Faulkner the job, and now sits on Epic’s board.

Faulkner started getting requests for her patient database through word of mouth, and sold to places such as hospital departments and community health centers. She formed in 1979 what was then Human Services Computing with $6,000, partly from her parents. Faulkner and a dozen individuals made up of colleagues and their family members invested a total $70,000. She never raised money from venture or private equity investors, and self-funded Epic’s slow expansion. Cerner, also founded in 1979 by three Arthur Andersen consultants raised venture capital before going public less than ten years later with $17 million in revenues.

By 2000, Epic had 69 customers, and had yet to figure in a top 20 list of EHR vendors for hospitals. Its hospital customers were negligible, but two had quietly garnered awards, notably the northwest branch of Kaiser Permanente in Portland, Ore. So, when the Oakland, Calif.-based HMO, began a search in 2003 to replace its old IBM system, Epic found itself on a short list that quickly became a face-off between Epic and Cerner. The Kansas City-based company had over $500 million in revenues in 2003, more than three times Epic’s.

Kaiser Permanente had set out to fully digitize its hospitals and affiliated physicians on a scale no other hospital had accomplished. The HMO has 36 hospitals, 533 medical offices and 9 million members. No EHR company had implemented that kind of grand project either. “The question was not ‘if you can do it, but how can you do it,’” says John Mattison, Kaiser Permanente’s Chief Medical Information Officer for southern California.

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Of course, I spoke to several Epic customers–some of them I quote. When I set out to do this story, my question was: What makes Epic successful? After all the company wins the industry’s top awards. Customers said Epic had the most integrated patient database, because it built it internally, and not through acquisitions; another reason was customer service. Astonishingly, no one told me its product was great. I came away with your conclusion: it’s better than anything else. You’re right, it is a sad thing.

One comparative problem for EHRs is the sheer complexity of data, combined with the multi-layered permission requirements – doctors can do this, nurses can do that, etc. There are so many moving parts that experience is required to build a strong system, which also makes the market that much harder to enter successfully.

All systems are being designed for goverment documentation. With SO much money at stake for meeting Meaningful Use, vendors can not afford to not certify their systems to meet goverment requirements. Also, with such a large focus on improving outcomes- data must be documented in order to get the statistics out– As the saying goes GIGO.

I have worked in Epic Systems for over 10 years and I am more of the mind set that it is a tool that makes be a better physician than I would be without it. Unfortunately I have also worked with some of the other competitors (CCHIT approved) and have found that their software interfered with my ability to take care of patients. Nothing is perfect out of the box and yes you need physicians who understand the system to recalibrate it for the users, but at least that flexibility exists. Epic’s strongest point is it’s data architecture which is why some of the other guys will never be able to produce an equivalently effective product.

I too am concerned about Epic, and I too have not found anyone who actually likes the system. Yes, the Epic product does seem stodgy, and they have set up a system of implementation that appears to be accelerating the cost of healthcare. Some of the points in the article can be examples. So disappointing. When a company comes along that thinks with more innovation and a bigger vision, I think they will do very well, as healthcare is hungry for that innovator.

Hospitals are paying loads of money for Epic EHRs, and they are going to have to live with that system for a long time as a result. I’ve written in the past about my concern over how this (driven by meaningful use) might impact innovation. I really hope it doesn’t, because health care is in dire need of innovation.